Key Takeaways

Down payment assistance covers upfront costs, easing homeownership for physicians.
Programs include grants, forgivable loans, deferred loans, and matched savings accounts.
Eligibility may depend on income, credit score, location, and first-time buyer status.
DPA applies to conventional, FHA, VA, USDA, and physician-specific mortgage loans.

Despite an average annual salary of $196,187, many physicians face financial challenges when buying a home. Even high-earning doctors can struggle to save enough to make a down payment on their dream home because of medical school loans, rising living expenses, and a delayed start of their earning years.

Plus, when we factor in the reality of the real estate market, where home prices are increasing, getting a home seems like a dream that might never come true.

The good news is that there are down payment assistance programs designed to make homeownership more attainable. If you’re a physician exploring ways to ease the burden of a down payment, read on to discover how to get help.

Table of Contents

What Is Down Payment Assistance?

Down payment assistance (DPA) is a form of financial aid that makes homeownership a reality by covering the down payment on a house and sometimes the closing costs.

DPA can make purchasing a home more feasible for physicians whose careers often involve years of study, residency, training, and a hefty student loan.

How Down Payment Assistance Works

The average cost of a home in the US is around $400,000 to $500,000. If you have the money to pay outright, that works perfectly. But most people, including physicians, don’t. The next option is usually to find mortgage programs to finance the house.

However, most mortgage lenders require buyers to make a down payment on the house to reduce the loan amount. The average down payment is often from 3% to 20% of the house cost, depending on whether you’re a repeat or first-time buyer.

The down payment lowers the loan balance, monthly payments, and interest paid throughout the mortgage loan. It also helps you build instant equity on the property.

But even with the benefits, paying the down payment with your own money can drain your finances. To resolve this, you seek assistance with the down payment to cover the costs.

Other than the mortgage loan and down payment, there’s another fee that a down payment assistance program can help you finance—closing costs. The closing costs refer to the fees for service providers, like attorneys, involved in the home-buying process. It ranges from 2 to 5% of the total loan amount.

Some DPA programs allow you to use their funds for the down payment and closing costs, while others don’t. Therefore you must thoroughly review any down payment resources to see their terms before applying.

Eligibility Requirements for A Down Payment Assistance Program

The eligibility requirements for down payment assistance programs vary, but most require applicants to be first-time homebuyers. A first-time buyer is anyone who doesn’t own a house or hasn’t purchased one within the past three years.

In addition to being a first-time buyer, some DPA programs have household income limits. Your income must fall within the area median income (AMI), the midpoint in income distribution for households in a given area. AMI varies by region, and the AMI threshold for DPA assistance varies by program.

Also, note that you can’t use DPA for investment or rental properties. The house you intend to buy must be for residence. The DPA program can help you fund the down payment of residences like a single-family home, townhome, condo, or even a multi-family property, provided you take primary residence in one unit.

Additionally, some programs require your credit and financial information. These criteria are necessary for down payment assistance loans. Sometimes, you may have to complete a homebuyer education course to certify that you’re up for the task.

Finally, you must be eligible for a 30-year, fixed-rate mortgage to qualify for most DPA programs. The repayment of this type of mortgage loan is spread over 30 years at a fixed interest rate and, consequently, with stable monthly payments.

Types of Down Payment Assistance Programs

The “assistance” in down payment assistance can fool you into thinking it’s free money, but the aid may actually be loans. With that said, let’s explore the ways to get down payment assistance:

1. Grants

Down payment assistance grants come as a one-time payment to help you reduce the cost of the down payment and closing cost on your desired property. The best part is that you don’t have to pay the money back if you qualify.

2. Forgivable Loans

A forgivable loan is structured like a regular loan but functions similarly to a grant if you meet certain conditions. The typical conditions involve paying your mortgage on time and living in the house within a stipulated period, often three to ten years.

As you live in the house, portions of the loan are gradually forgiven. The full loan is forgiven if you stay for the entire agreed period. But if you move out early, you’ll need to repay the remaining balance based on how long you lived there.

3. Deferred Payment Loans

A deferred payment loan is another form of assistance granted as a loan. However, it differs from your typical loan in two ways. Firstly, there’s no interest. This means that you only have to pay back the amount you borrowed. Secondly, you don’t have to make payments right away.

You’re only required to repay deferred payment loans when:

the loan term ends,
you sell the house, or
refinance your primary mortgage.

4. Low Interest Loans

Low-interest loans are set up like a second mortgage loan but with lower interest rates than regular loans. The repayment period is often spread over a few years. So as you make payments for your primary mortgage, you’ll have to pay for the second one.

5. Individual Development Accounts

Individual development accounts (IDA), also known as matched savings accounts, are designed to help eligible households save for major purchases, including the down payment on a house. You can also use the funds to close cost assistance. Here’s how it works.

For every dollar you save in an IDA, the sponsoring organization matches it with additional funds. NeighborImpact, for instance, grants $5 for every $1 you save. However, there are income limits on these types of assistance programs, which may not be favorable to a physician because of their earning potential.

6. Lender DPA Programs

Lastly, some mortgage lenders have their down payment assistance. Still, you must take their mortgage to benefit from the assistance program.

The problem with using lender DPA programs is the potential high interest rates of their mortgage loans. However, you can get grants or matched savings accounts to cover your down payment and closing costs. This offsets the likely high interest of their mortgages and saves you time searching for eligible DPA programs.

How to Find Down Payment Assistance Programs

Finding the right down payment assistance program requires research, as the availability and terms of these programs vary by location and provider. To guide your search, check out some effective resources to help:

Your Lender

Many lenders are aware of down payment assistance and can guide you toward programs that complement your loan. Also, some lenders offer assistance with their own home down payment.

HUD’s Website

The U.S. Department of Housing and Urban Development provides a directory of state and local homebuying programs by location, making it easier to find down payment assistance where you reside.

Down Payment Resource

Down Payment Resource is a comprehensive online tool that provides a searchable database of down payment assistance programs in the U.S. It also has an eligibility tool that helps you determine your eligibility for assistance and streamline your search.

State Housing Finance Agencies

Each state in the U.S. has a Housing Finance Agency (HFA) that provides resources for homebuyers to access low-interest mortgages, down payments, and closing cost assistance. Find your state HFA online to see the assistance programs you’re eligible for.

Your City’s Website

Your city or county may offer down payment assistance to make homeownership more attainable for its residents. Head to your city’s website now and see if there’s any program you qualify for.

Real Estate Agents

Finally, real estate agents with relevant work experience, especially with homebuyers, can help you find some down payment assistance programs that meet your requirements.

What Mortgages Can Down Payment Assistance Be Applied To?

Down payment assistance can support various types of mortgages, including:

Conforming loans
Federal Housing Administration (FHA) loans
U.S. Department of Agriculture (USDA) loans
Veteran Affairs (VA) loans
Conventional loans (not insured by the government)

Final Thoughts

For physicians, down payment assistance can be an invaluable resource for homeownership. If eligible, you can get help through grants, forgivable loans, and other types of loans to cover a house’s down payment and closing costs.

With the online resources available for finding assistance, you can check for suitable programs from the comfort of your office.

But even when you qualify for assistance, getting a house remains a significant financial decision. So, before making that jump, consult Physicians Thrive to assess your finances and guide you in making sustainable financial decisions.